FTX sues Binance and CZ for nearly $1.8b over alleged SBF transfer

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As a seasoned crypto investor with over a decade of experience navigating the volatile and ever-evolving digital asset market, I find myself intrigued by the latest development between FTX and Binance. The allegations of fraud, misleading statements, and balance-sheet insolvency are not new to this space, but the sheer scale of this dispute is staggering.

In simpler terms, FTX is filing a lawsuit against Binance Holdings and its ex-CEO Changpeng ‘CZ’ Zhao, accusing them of involvement in a fraudulent stock buyback carried out by Sam Bankman-Fried that was estimated to be worth approximately $1.76 billion at the time.

As a researcher, I recently discovered that in July 2021, I (or we) received some funds from the then-CEO of FTX, Sam Bankman-Fried, as part of a shares repurchase agreement. This information was disclosed in a Bloomberg report published on November 11. The executives at Binance, including CZ, were involved in this transaction.

According to court documents, Sam Bankman-Fried sold roughly 20% of FTX’s international subsidiary shares and about 18.4% from its U.S division. He financed the repurchase using a combination of FTX’s token FTT and coins BSB (issued by Binance) and BUSD (Binance-United States Dollar). The total value of this transaction was approximately $1.76 billion at the time it occurred.

According to FTX’s team, the funds transferred by Sam Bankman-Fried to Binance were allegedly a result of fraudulent activity. This is due to the fact that at the time of the repurchase deal with Binance, FTX and its sister company Alameda Research were already in a state of insolvency on their balance sheets. Consequently, they suspect the transfer was not legitimate.

Beyond this, FTX is also taking action against CZ for posting tweets alleged to contain numerous “untrue, misleading, and potentially fraudulent statements” in the run-up to the crypto exchange’s demise. The legal team claims that these posts were intentionally published to undermine a competitor, labeling them as “deliberately crafted to harm his competition.

In November 2022, there was an instance where CZ (Changpeng Zhao) posted a tweet suggesting that Binance planned to sell $529 million of FTT tokens. This tweet sparked a wave of withdrawals from the exchange as traders grew anxious. Binance did not respond to Bloomberg’s inquiry regarding these allegations.

Previously incarcerated Binance CEO Changpeng Zhao (CZ) was freed towards the end of September following a four-month term behind bars. Since then, he has been active at cryptocurrency gatherings and granting media interviews. Conversely, Sam Bankman-Fried is currently serving a 25-year stretch in a federal penitentiary since the previous year.

Nevertheless, it’s been contended by his latest legal representative that the initial verdict was biased against Bankman-Fried, assuming him to be culpable right from the outset.

Beyond Binance, FTX has initiated approximately 23 legal actions against previous investors, associates, and customers in an effort to recover funds for creditors. These lawsuits involve individuals like Anthony Scaramucci, former White House communications director, and his hedge fund SkyBridge Capital, as well as digital-asset exchange Crypto.com, political groups such as FWD.US, and others.

Moreover, it’s been reported that the sibling investment firm of FTX, Alameda Research, has initiated a legal action against Waves founder Sasha Ivanov. The aim is to recover approximately $90 million in cryptocurrencies.

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2024-11-11 13:42